1 Ac tua lly, judgment was ent ered i n favor of Frost

Nati onal Bank, as t ruste e for the Li ll ian B. Denson Trust. However, aft er t he tr ial courtenter ed judg m ent, D ens on w as a llowed to substi tut e for Fr ost Nati onal Bank, as t ruste e. NO. 07-05-0007-CV IN THE COUR

T OF APPEALS FOR THE SEVEN TH DISTRICT OF TEXAS

AT AMARILLO PANEL B SEPTEMBER 11, 2006

______________________________ CHESAPEAKE OPER

ATING, INC. an d CHESAPEAKE PAN HANDLE LIMITED PA RTNERSHIP, Appellants

v. LILLIAN BOND DENSON, Appellee

_________________________________ FROM THE 69 TH DISTRIC T COURT O F MOORE COUNT Y; NO. 98-33; HON. RONALD ENNS, PRESIDING

_______________________________

Opinion

_______________________________ Before QUINN, C.J., and CAMPBELL and HANCOCK, JJ. Ch esapeake Operating, Inc. and Chesapea ke Panhandle Limited Partne rshi p (collectively

referred to as Chesapeake) appeal from a judgment entered in favor of

Lillian Bond Denson. 1 Through that documen t, the trial court construed adivisi on order, decl ared the rights of the parties under that order, and awarded damages. Two issue s are pending2 No one quest ions t hat the pr ovi sion be came part of t he underl yi ng mineral lease. This occur red per

the pro vis o in the divi sion orders st ati ng that to t he extent

the or der “cov er[e d] matters not i ncluded in t he above m entioned leasehold, and insofar as it cover[ed] m atter n ot d ea lt wit h ther ein, [i t] consti tut e[d] an am endm ent of said lease.” 2 before us. They in volve the trial court’s const ruction of parag raph “Fourth ” of divis ion orders executed by the predecessors-in-interest of bo t h C h e s a p e a k e a n d D e n s o n
. We modify the judg ment of the trial court and affirm it as modified. Background Denson stood as a royalty interest owner and Chesapeake stood as the le ssee and ope rator under the mineral lease enco mpassed by the division orders to whic h w e previousl yalluded . Their predecessor

s-in- inter est, w ho exe cuted t he orde rs were J. T. Sneed, Jr., and Texoma Natural GasCompany (Tex oma), res pect ive ly. Nex t, the paragraph i n question ( entitled “Fo urth”) rea d: Itis understood that at this ti me you are sub ject to and arepaying an occupation or producti on tax of two per cent (2% ) of the market value of gas produced and saved. If hereafter there s hall be any incr ease in the amount of said ta x, or ther

e shall be lev ied any new occupation, pr

oduction, severance or other excise tax, one-ei ghth ( 1/8) of such incr ease shall be deducted from the above ag reed ro yalty value of the g as which is then applicable. 2 According to Denson, this provisi on obligated Tex oma, and now Chesapeake, to pay all of the first two per cent of any occupation, production, s everance, or excise tax result ing from the production and sale of gas from the premises. Chesapeake dis agreed. It a rgued thatbecause statute n ow oblig ated royalty interest ow ners as well as less ees and operators to pay their pro rata share of th e tax, it need only pay its pro rata share (as opposed to all) of the fir st two per

cent. The tria l court si ded with D enson, and this appeal followed.3

Issue One – Who Pays t he First 2% To determine w hether the tri al court erre d in requi ring Ches apeake to pay the first 2% of t he ta x, we must cons true para graph “Four th.” In do ing so , we initiall y note that no
one contends the order or paragraph was ambiguous. Nor do we find itso. Its provisi ons lead only to one reasonable meaning

. See J. M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003)

(stating that a contract is ambiguous if i ts terms can be afforded two
reasona bl e yet conflic

ting inter pretations). Consequentl y, our cons truction of the or der involves a question of

law. Cross Ti

mbers Oi l Co. v. Ex

xon Corp., 22 S. W .3d 2 4, 26 (Tex. App.–Amarillo 2000, no pet.) (holding that the construction of an una mbiguous contract is
a question of law ); Borders v. KRLB, Inc., 727 S.W.2d 357, 359 (Tex. App.–Amaril lo 1987, writ r ef’d n.r.e.) ( stating si milarly ). Next , we must st rive to g ive effect to the pa rties’ in tent, as gar nered from th e language used in the writing when read as a whole. C ross Timbers Oil Co. v. Exxon Corporation, 22 S.W.3d at 26. Precedent further requiresus to afford the words used by the parties thei r plain, or dinary, an d generally

accepted meaning , unless the i nstrument requiresotherwis e. Sun Operating Par tnership, Ltd. v. Holt, 984 S.W.2d 277, 285 ( Tex. App.–Amarillo 1998, pet. denied) ; Phillips P etroleum Co. v. Gillm an, 593 S.W.2d 152, 154 (Tex. Civ. App .–Amarillo 1980 , writ ref’d n.r.e.). Autho ri ty simil arly pr ohibits us from rewrit ing the instrument to say something it

does not. Borders v. K RLB, Inc., 727 S.W.2d at359. Thus , we cannot disregard what the parties intended simplybecause one comes to dislike i ts terms or t hinks that someth ing else is needed. HECI Exploration Co. v. Neel, 982 S.W.2d 881, 888-89 (Tex. 1998). In other words, t he part ies to the i nstr ume nt ha ve4

the freedom to select w hattermsand provisions to include before executin g it. Because they strike the deal they

choose and vo luntarily bind themselves in the manner they opt , we generally

cannot interfere w ith their decision. To do so would be to underm ine not only the sanctity

afforded their agr

eement but also the fr

eedom given them to reach it

. With this said, we t urn to the parag raph “Fourth .” One reading the pr ovision i mmediately see s that Texoma pai d an occupation or production tax of 2% on the market value of the gas ex tracted. This liability

of Texoma was “understood” by Sneed. M oreover, n othing was sai d of Sneed being oblig ated topay s ame or any part of i t. Yet, in the ensuing sentence, the par ties to the or

der consider

ed the likelihood of an “increasein the amount of said tax” or the levy of a “new occ upation, production, severance or other excise tax. ” In prov iding for that likeli hood, it was

agreed that“on e-ei ght h (1 /8)of such increas e shall be deducted fro m the above agreed ro y alty value of the gas which is then applicable.” (Emphasis added ). Reading the phrase “such increase” in context, w

e see that it r

eferred to a ri se in the tax or taxesthen being l evied upon the gas prod uced and sold from thelease. And, w hen th at incre ase came into existence, one-eighth of it would be paid by Sn eed thro ugh a deduction from the royal ty due him. So, in effect, w hat the partiesdid was a gree among t hemselves tha t the interest of the royal ty owner , i.e. Sneed then and Denson now , would be reduced for the purpose of paying any occupation, production , severance or like ta x on the gas whe n the amount of that tax exceede d two per

cent of th e mar ket val ue of t he gas. And, if the royal ty p ayment due the roya lty ow ner was not affected by the chang e until it ex cee ded tw o percent, then, logically, Texoma, and its successors-in -i nterest ( i.e. Chesapeake), were saddled wi th the oblig ation of paying the first tw o percent.3 Nor did C hes ape ak e pro vide e ither ar gum ent o r auth ority indi cati ng that the st atut orychanges leg ally precl uded us from enforcing the original t erm s of the division orde r. Th is dea rth of arg um ent a nd a utho rity affo rds us little bas is upo n wh ich to re lieve C hes ape ak e of its c ontra ctua l obligation

. 5 We acknowled ge Chesapeake’ s contention that , at the time the division orders were signed, only the “ producers” were obli gated to pay the tax and r

oyalty owners w

ere not “producers. ” So t oo dowe ackn owl edg e thecontenti on th at th e gr oup o f e nt ities now statutorily responsible f or ass uring payment of the tax includes royalty interest owners. Yet, the statutory changes do not relieve us from attem pting to enforce the origi nal intent of the parties to the agreement. This is s o because such chang es cannot operate retroactively

to deny indi viduals of pr eviously vested ri ghts. Ex parte Abell , 613 S.W.2d 255, 260 (Te x. 19 81). A nd, by the ti me the laws changed to impos e upon a royalty interest
owner an obligati on to pay tax upon the gas, t he royalty interest ow ner here had alr eady contracted with it

s lessee to as sure that the l essee paid the fir st two per

cent of the ta x . Given this pre-ex isting contractual ar rangement, the s ubsequent sta tuto ry chang es to which Chesapeake all uded had and have no affect upon S need’s entitle ment and Chesapeake’s obl igation. 3 We further acknowledge Chesapeake’s alte rnate contention. It involved se v eral components. The first encompasse d the propos ition that any tax for w hich Sneed was statutorily responsible automatically became a new tax. The second encompassed the proposition that bo th Tex oma and Sneed agreed to pay their pro rata share of all new taxes. And, from these componen ts, Chesapeake d educed that since the ro yalty

owner agreed to pay his pro rata share of the new tax, it was not liable to pay the first two percent of the n ew tax. To accept this contention, however, w ould be to ig nore aspects of6

paragraph “Fourth,”and that we cannot do. Authori ty prohibi ts u s from simply selecting particular

words and phrases of a contr act t o weigh when others exi st which are also of import. Again, w

e must read the doc ument as a whol e, Cross Timbers Oil C o. v. Exxo n Corporation, 22 S.W.3d at 26, and afford m eaning to each word written when at all possible. See ABS Sherman Properties, Ltd. v. Sarri s, 62 6 S

. W. 2d 53 8, 53 9 (Te x. App.–Texarkana 1982, writ ref’d n.r.e.) (requiring the court to assign import to all wordsof the agreement). Cons eque ntly, here, the words and phrases surrounding reference to the imposition of a “ne w tax ” canno t be ignor ed. Of particul ar import ar e the passages appearing bef ore a nd af ter t he al lusio n to a “new ta x” and wh ich con tain the word “increase.”The former reads “ [i]f hereafter ther e sha ll be a ny increase in the amount of said tax” w hile the lat

ter sta tes “one -ei ght h (1 /8)of such increas e shall be deducted from the above agr

eed royalty

value of the g as . . . . ” (Emphasi s added). And, when those passages ar e read along with that mentioning a “ new tax, ” there can onl y be but on e reasonable int erpr

etat ion of w h at the parties intended. They sought not to distinguish between old and ne w taxesbut r ather define wh at was to beincluded in t he idea of an “increase”in taxes. And, the “increase” intended by their words w as any tax , new or ol d, thatexceeded the t

wo percent mentioned in the openi ng sentence of par agraph “Fou rth.” In sum, paragr

aph “Fourth”addressed the obligatio n of paying taxes imposed upon the gas produced . Through that provisi on, the partiesagreed among them selves t hat royalty owners, such as Sneed and now D enson, would 1) share in the obligat ion once the tax exceeded two percent and 2) then pay only their fracti onal share of the excesswhen4 Ag ain, tha t agre em ent is n ow p art of th e un derlying m inera l lease

. 7 the tax exceeded that thres hold. 4 So, because the trial court interpreted the provision in
a way effec tuat ing th at agr eem ent, it did not e rr, an d we overrule Chesapeake’s first issue. Issue Two – Does the Wordi ng of the Judgm ent Compor t with theDivisio n Order? In its second issue, Chesapeake ass erts that a spects of the judg ment should be mod ified to comport w ith the reli ef sought and won by Denson and the wordi ng of paragraph “ Fourth.” We sustain the is sue. The modifications des ired pertain ed to t he trial court’s interpretation of the order. Furthe rmore, Den son s oug ht a d ecl arat ion obli gat ing “al l le ssor s . . . topay

the fi rst tw o percent

. . . of severance taxes solely from their share ofproduction, and that [he r] royalty int er ests are to be ch arged with se veran ce ta xes on ly where thos e taxe s exce ed two percent . . . . ” Next, in addressi ng the prayer, the tria l court decr eed that [p]ursuant

to the express terms of Plaintif f’s Exhibits 3 and 28, all severance tax assessments above 2% which are assessed ag ainst the proceeds of the subject mineral production are to be divi ded between the operator , now the Chesape ake defendants, and the applicable royalty interest ow ners in the ratio of the div ision of the working i nterest and roy alty inter est in quest ion. (Emphasis added). It is the italiciz e d words w ith whic h Chesapeake has concern. According to it, the division order did not consist of an agreement between an “operato r” and “all applicable royalty interest owners.” Ra t her, the parti es to it were Texoma and Sneed. Furthermore , the only litigants remaining at the time of trial were Chesapeake and the tru steefor t he D enso n tr ust (th e la tter subs equ entl y be comi ng D enso n her sel f vi a substitution). Thus, the tria l court purp ortedly erred in referr ing to “the operator” and “all applicable r

oyalty interest ow ners” in i ts judgment. We agree and sustain the iss ue.5 In he r ple ad ing , D en so n a ctu ally a llud es to “ all le ss or s.” Bu t, w e v iew this as a typographical error.

Given the con text of the all egation, she obviously me ant “all lessees.” 8 Atrial cour

t lacks jurisdiction to enter judgment for a non-litig ant; to do so cons titutes fundamental error on i ts part if the error is appar ent from the face of the record. Supak v. Zboril, 56 S.W.3d 785, 793 (Tex. App.–Houston [14 th Dist.] 2001, no pet.). Gi ven this and the fact that the record indicates tha t no other roy alty ow ners wer

e litigant s at the time of trial, the trial court here lacked jurisdiction to adjudicat e the potential cl aims of royalty
owners other than Denson. And, since its ju dgme nt ca n be c onst rued as do ing so , we will modify it. Next, we turn to the rule of procedure requi ring the j udgment to comport with the pleadings. T EX
. R. C IV
. P. 301. W ith this in mind, we note that Denson did no t request, in her live pleadings, that the trial court address the obligat ions of any “ operator” to pay the first two perc ent of the sever ance taxes. Instead, she soug ht a declarati on regardi ng the obligation of Chesapeake and all less ees to do so. 5 Moreover , while an operator may be a lessee, a lessee may not necessarily be an opera tor. So, placing the obligat ion to pay the tax upon the“operator”exceeds the scope of relief re quested by Denson. Thus, the judgment will be modified to correct this. Acco rdin gly, the second sentence in pa ragraph ara bic numbe r three of the jud gment is modified to read: “ Pursuant to the ex press terms of Plaintiff’s Ex hibits 3 and 28 , all
severance tax asses smen ts a bove 2% w hich are asse ssed against the proceeds of the subject mi neral production are to be divided b etween Chesa peake Panhandle Limi ted Partnership and Chesapeake Oper ating, Inc., and their

successors -in-inter

est, and Lill ian9

B. Denson, and her

successors

in-interes t in the rati o of the division of the working interest and royalty

interest i n question.”As modified, the j udgment is affirmed.

Brian Quinn Chief Justice